November 12, 2007

 

Australia's AWB cuts estimated returns on export wheat sales

 

 

Australian wheat exporter AWB Ltd. (AWB.AU) Monday cut its estimate of pool returns for most grades of the crop to be harvested by year end, reflecting the impact of a weakening in international wheat prices in the past two weeks.

 

AWB cut its estimated gross return on new crop benchmark Australian Premium White grade of 10.5 percent protein by AUS$10 to AUS$385 a tonne, FOB, while Australian Prime Hard grade of 13 percent protein also was cut AUS$10 to AUS$400/tonne and new crop feed grade was cut AUS$10 to A$290/tonne.

 

However, AWB lifted its estimated gross return for new crop Australian Premium Durum by A$20 to A$560/tonne.

 

David Johnson, general manager of the pool, said Chicago wheat futures have dropped about AUS$25 in the past two weeks, but AWB has managed its physical sales programmes and hedging positions to offset the impact of this steady decline in Chicago on pool returns.

 

He did not explain the increase in the durum estimate.

 

AWB held unchanged its estimate of returns for the 2006 crop, with the benchmark grade steady at an estimated return of AUS$239.50/tonne gross, FOB.

 

AWB, the majority exporter from Australia, pools returns from its export wheat sales and deducts costs before paying producers. Sales from a pool can continue for more than 18 months after harvest, depending on production and demand.

 

Australian wheat production is facing another poor year, with the industry focusing on a crop of about 12 million tonnes, up from an actual 10 million tonnes in 2006 but still only about half of the 25 million tonnes produced in 2005.

 

After domestic wheat demand of around 7 million tonnes is met, the balance is available for export, usually making Australia a major global supplier of wheat.

 

The next pool estimate update is scheduled for Nov. 19.